Indian market is almost at the fag end of the April-June earnings seasons, so it is time to do a health check of India Inc. However, the equity market is going through a turbulent phase as there is huge disconnect between the level where the index is and where stock prices are. “This is a complete and outright bear market with the exception of 20 stocks, says Udayan Mukherjee, Managing Editor, CNBC-TV18. “People are bleeding, stocks have been absolutely crushed, yet the Sensex suddenly tells you 19000. This is one of the strangest kinds of bear phases that I have seen in the last 15 years,” he adds According to Prabhudas Lilladher analysis, here are 10 stocks that are likely to give you a 20-60% returns post April-June earnings.
Prestige Estates Projects Target Price: Rs 200 Implied Upside 60% Rating: ACCUMULATE Rationale: A continuing healthy performance on all fronts, improving operating metrics and a strong outlook for the future aids us in retaining our positive stance on the company. The company’s net asset value, post debt, stands at Rs77.8bn which translates to Rs222/share. Our target price is based on a 10% discount to NAV which translates to Rs200.
Jubilant Life Sciences Target Price Rs 129 Implied Upside 53.6% Rating: ACCUMULATE Rationale: While the sign of rising prices in PPES would help Jubilant to boost LSI business, we are concerned on pricing pressure in its major Pharma products. The company maintains average sales growth of 20-21%, with EBITDA margin at 21% in near-to-medium term. Jubilant’s core EPS 4.7 is in line with expectation, though we believe that high competition in Pharma products would increase margin risk.
ICICI Bank Target Price Rs 1,200 Implied Upside 32% Rating: BUY Rationale: ICICI's better-than-expected Q1FY14 was largely treasury driven adjusted for which Q1FY14 was mixed with steady NIMs and improvement in core fees, offset by slowing growth and inch, up in delinquencies. Risks have increased from their lumpy Infra exposures but at 1.2x Sep 14 book, we believe some of these risks are discounted. With the macro uncertainty and slowing growth, we expect a slow recovery as the leveraging, up process has been pushed out to FY15.
Gujarat Pipavav Port Target Price Rs 62 Implied Upside 31.9% Rating: BUY Rationale: It reported revenues to the tune of Rs 1.2bn, 30% YoY growth and flat on a QoQ basis. The YoY growth is largely on account of the discontinuation of the Maersk Line service that had taken place last year which had led to volumes plummeting. The company has now recovered most of the lost volumes through the addition of new services.
Kalpataru Power Transmission Target Price Rs 84 Implied Upside 31.3% Rating: ACCUMULATE Rationale: Kalpataru reported a very strong sales growth of 27% YoY at Rs 8.9bn. The execution was strong both in domestic and international markets. While the transmission line sales growth was at 35% YoY, sales for infrastructure segment de-grew by 28% YoY. We have increased our earnings by ~ 5% for FY14& FY15 to factor in increased guidance. We believe increased focus on international market will help tide slowdown in domestic markets and support overall growth.
YES Bank Target Price Rs 500 Implied Upside 30.5% Rating: BUY Rationale: Its Q1FY14 performance and management action on enhancing provisioning was positive. RBI's recent actions will impact margins and slow growth/revenue momentum but despite factoring weak outcomes on most operating metrics, we expect Yes bank to report ROE of 22‐23%. Hence, at 1.6x FY15 book risk‐reward is attractive but RBI action remains the key stock catalyst which remains difficult to predict.
United Phosphorus Target Price Rs 185 Implied Upside 30.3% Rating: BUY Rationale: EBITDA margins expanded 110bps YoY due to higher operating leverage and improved product mix. While India (24% YoY growth), RoW (43% YoY growth) registered handsome growth, North America witnessed revenues decline of 23% YoY due to delay in sowing and high inventories in the channel. However, management remains confident that North America will revive in Q2FY14E. Net working capital improved to 92 days at the end of Q1FY14 compared to 103 days last year.
Polaris Financial Technology Target Price Rs 135 Implied Upside 28.6% Rating: ACCUMULATE Rationale: Polaris Software Lab (Polaris) reported Q1FY14 results below PLe/Consensus expectation due to weaker FT Sourcing revenue. The company witnessed good client win in the quarter and sees good growth opportunity ahead.
CEAT Target Price Rs 151 Implied Upside 28% Rating Accumulate Rationale: CEAT reported a 7.6% YoY growth in its top-line at Rs 12.8bn, mainly driven by ~10.7% YoY increase in volumes. On a sequential basis, Top-line de-grew by 2.3% mainly on account of ~3.4% volume de-growth. EBITDA margin improved by 120bps QoQ to 10.6% mainly due to 180bps QoQ improvement in gross margins.
Wipro Target Price Rs 480 Implied Upside 25.7% Rating BUY Rationale: Wipro reported Q1FY14 results ahead of PLe/Consensus expectation. Moreover, the guidance is ahead of consensus expectation and in line with our expectation. The management was more assertive about improving demand environment led by improved sales cycle. We see the current quarter performance to trigger an early stage of multiple-rerating.